CIC FINANCE:

Dollar$ & SENSE

Dollars & Sense strives to provide key insights for successful common interest community (CIC) finances.

Annual Budget 1-2-3

ANNUAL BUDGET 1-2-3: PROCESS RECOMMENDATIONS for ACCOUNTABILITY, TRANSPARENCY & THOROUGHNESS

While ultimately subject to your state statutes, most states do not prescribe the exact process to analyze, review and approve your annual budget. Lack of an exacting legal prescription leads us to many great examples of accountable, transparent budgeting processes that engage constituents (your homeowner members). Process matters!

  1. Gather line-item budget data in a spreadsheet. Use a readily editable product with columns and rows: Excel, Google Sheets, etc.

  2. Make sure you can easily collaborate.

    • Use collaborative online tools like Sharepoint or Google Drive. Eschew multiple copies.

    • Hold meetings. Trying to review a line-item budget via email is incredibly inefficient and painful.

  3. Stand up a committee and/or dedicate Board meeting time to review the draft budget.

    • Plan to spend a minimum of one to two hours of meeting time reviewing your annual budget.

  4. Disclose an initial draft of the budget at an open Board meeting at least one month before you plan to approval the final draft.

  5. Approve a final draft for ratification at a well-advertised, open Board meeting.

  6. If your CIC is located in Washington State (and certain others), you are REQUIRED to (see below):

    • provide adequate notice (including all required content) of a budget ratification meeting AND

    • hold a budget ratification meeting

      • N.B. budgets are automatically ratified UNLESS a majority of the allocated voting power actively dissents to adoption (rare)

        • A 2013 WSCAI post is out of date re: requirements, but still provides helpful language for the ratification meeting:

          1. Version 1: “No motion to reject the budget having been made, the budget is ratified.”

          2. Version 2: “Since a majority of the total voting power of the association is not present in person or by proxy at this meeting, it is legally impossible for the budget to be rejected. The budget is therefore ratified.”

What to Know: US Treasuries & Brokered CDs

A FEW THINGS to KNOW ABOUT US TREASURIES & BROKERED CDs

  • As with any financial account, you’ll need to keep your authorized signers up to date. The process might be more arduous with a brokerage account vs. working with your local bank. Don't Trade Convenience for Yield!

    • If you do not already have one, you should consider establishing a brokerage account to invest in Treasuries unless your existing banking relationship provides this ability.


  • US Treasuries generally have a $10MM limit per purchase

    • CICs with significant reserves can easily invest in large tranches

    • Both FDIC insurance and US government debt securities (Treasuries) are backed by the full faith and credit of the United States of America

      • US Treasuries make the $250,000 FDIC insurance limit irrelevant. If the US Government defaults on its debt, gold bullion is likely the only way to guarantee your principal.

      • Certain financial institutions allow you to auto-roll your T-Bills just like auto-rolling a CD or IFND

    • US Treasury Zero-Coupon Bonds provide a discount to face value at the time of purchase relative to their yield. Their principal value also fluctuates more than other bonds based on FOMC action to adjust overnight interest rates.


  • US Treasury I-Bonds adjust their yield semiannually relative to inflation. These bonds pay 9.62% APR between May and October 2022, but there are some hoops:

    • A Treasury Direct account; your “Entity Account Manager" MUST:

      • be a corporate officer or designated employee and

      • be authorized to act alone

    • $10,000/yr limit / organization for electronic purchases via Treasury Direct

    • Must be held a minimum of twelve months

    • Redemptions before five years forfeits three months of interest


  • Brokered CDs typically pay a higher APY than comparable term CDs from your local or national bank.

  • Brokered CDs’ principal value can change unless held to maturity

    • Time to maturity and interest rates impact the value

      • Falling interest rates may allow the sale of a brokered CD for more than its original value

      • Rising interest rates may lock in a brokered CD to maturity because disposing of it would result in a loss of principal

    • Some states’ ‘Blue Sky’ statutes restrict purchasing brokered CDs from other jurisdictions.

  • Brokered CDs may include a call option that allows the issuer to redeem them at face value (plus unpaid accrued interest) prior to the stated maturation

Do You Know Your Financial Advisor?!

…”for years people like me have been telling you that advisers have to disclose much more about themselves than stockbrokers do, so you can make better-informed decisions about their services and integrity… however, that isn’t always true. In some ways, financial advisers have to disclose less than brokers do—and what they don’t tell you could hurt you. - WSJ 11/4/22

The Best Places to Get Income in the Bond Market Now

    • Bonds have done so poorly this year that many investors probably are wondering what the point is of owning any.

  • It’s unsurprising that many are fleeing the bond market, but those investors could be missing some key points, experts say. The market now may not be far from its cyclical low. And even if it doesn’t recover quickly, bondholders will continue to enjoy a decent stream of interest payments. - WSJ 11/6/22

The $42 Billion Question: Why Aren't Americans Ditching Big Banks?

Since the start of 2019, Americans have lost out on at least $291 billion in interest by keeping their savings in the five biggest banks. That total balloons to $603 billion when going back to 2014, when the FDIC started tracking consumer deposits in money-market and other savings accounts. Why haven’t savers moved more of their money?

  • Opening a new bank account is time consuming.

  • Some customers aren’t aware of how much money they could make by switching. Others just don't care.

  • People don’t think critically about financial decisions. - WSJ 12/08/22

WA CIC BUDGET REQUIREMENTS

WA State CIC Budget Requirements
SMAARTE Group
  • Need some practical advice to understand a project?

  • Want a jump start to reinvigorate your governing documents?

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  • Does service delivery from your management company meet all your expectations?

  • Illuminate your community! Get SMAARTE